Question A:
In the aftermath of Hurricane Ian, the level of Florida’s GDP in five years will be substantially lower than it otherwise would.
Responses
Responses weighted by each expert's confidence
Question B:
The prospect of further costly extreme weather events means that there is a substantial chance that some private property insurance markets will no longer exist in ten years in states such as Florida.
Responses
Responses weighted by each expert's confidence
Question C:
Without large government subsidies, mandated flood insurance requirements would substantially reduce losses from subsequent natural disasters by encouraging economic activity to migrate from the most flood-prone areas.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Daron Acemoglu |
MIT | Bio/Vote History | ||
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Economic theory predicts that consumption and welfare should be lower, but GDP can be hired because of an investment boom to rebuild. There are several examples of this. Alternatively, of course, GDP could be lower because productive resources have been destroyed.
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 Joseph Altonji |
Yale | Bio/Vote History | ||
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Loss estimates were about 60 billion. Florida state GDP in 2021 is about 1 trillion. Reconstruction will stimulate demand.
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 Alan Auerbach |
Berkeley | Bio/Vote History | ||
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 David Autor |
MIT | Bio/Vote History | ||
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Given the federal and state subsidies and the intense demand for living in Florida, I think there will an investment boomlet and rebound
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 Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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 Abhijit Banerjee |
MIT | Did Not Answer | Bio/Vote History | |
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 Marianne Bertrand |
Chicago | Bio/Vote History | ||
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 Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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Reconstruction typically boosts GDP (even though welfare may not be higher).
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 Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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 Judith Chevalier |
Yale | Bio/Vote History | ||
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Among other things, I have uncertainty about how much aid will ultimately flow into the state.
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 David Cutler |
Harvard | Bio/Vote History | ||
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 Angus Deaton |
Princeton | Bio/Vote History | ||
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GROSS domestic product does not deduct hurricane damage, but does include repairs and rebuilding. It is a standard critique of GDP that it goes up after natural disasters. It is likely to stay up for some time. Actual capital stock may well be lower.
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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There may be other events that cumulatively have "substantial" impact, but Ian alone seems not big enough to have a substantial impact 5 years later.
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 Aaron Edlin |
Berkeley | Bio/Vote History | ||
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 Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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 Liran Einav |
Stanford | Bio/Vote History | ||
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 Ray Fair |
Yale | Bio/Vote History | ||
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 Amy Finkelstein |
MIT | Did Not Answer | Bio/Vote History | |
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 Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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 Austan Goolsbee |
Chicago | Bio/Vote History | ||
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 Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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 Robert Hall |
Stanford | Bio/Vote History | ||
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Probably not, because fixup investment is included in GDP. The key point is that consumption will probably be lower.
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 Oliver Hart |
Harvard | Bio/Vote History | ||
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 Bengt Holmström |
MIT | Bio/Vote History | ||
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 Caroline Hoxby |
Stanford | Bio/Vote History | ||
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There are many factors to evaluate here, but economic history should make us very cautious about grand pronouncements on Florida's GDP and population.
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 Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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 Kenneth Judd |
Stanford | Bio/Vote History | ||
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GDP includes the expenditures on fixing the damages. Insured losses should be recovered in the next several years, and this process will bring in new economic activity. GDP over the next several years is not an indication of how much the current residents lose.
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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huge incentives to rebuild and remember the way gdp accounting works, we count the spending not the lost assets/stock. They may not make it, but substantial is a high bar.
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 Pete Klenow |
Stanford | Bio/Vote History | ||
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 Jonathan Levin |
Stanford | Bio/Vote History | ||
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 Eric Maskin |
Harvard | Bio/Vote History | ||
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 William Nordhaus |
Yale | Bio/Vote History | ||
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May be larger with rebuilding, but probably not appreciably different.
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 Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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 Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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 Larry Samuelson |
Yale | Bio/Vote History | ||
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 José Scheinkman |
Columbia University | Bio/Vote History | ||
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 Richard Schmalensee |
MIT | Bio/Vote History | ||
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Rebuilding will likely still be ongoing implying lower productive capacity but higher construction activity.
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 Carl Shapiro |
Berkeley | Bio/Vote History | ||
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 Robert Shimer |
University of Chicago | Bio/Vote History | ||
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 James Stock |
Harvard | Bio/Vote History | ||
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 Richard Thaler |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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 Christopher Udry |
Northwestern | Bio/Vote History | ||
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Catch up after individual storms is fairly rapid
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Daron Acemoglu |
MIT | Bio/Vote History | ||
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Unclear. If such events become a certainty, insurance wouldn't make sense. If they become more likely but there is no adverse selection, there will be greater demand for insurance. If events are so bad that insurance companies could go bankrupt, this can prevent private insurance
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Joseph Altonji |
Yale | Bio/Vote History | ||
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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We already see home insurers pulling out of FL. The state is now subsidizing home owner insurance, effectively taxing all residents to support housing in non-viable places. The equilibrium of this game is elusive.
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Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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Abhijit Banerjee |
MIT | Did Not Answer | Bio/Vote History | |
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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Judith Chevalier |
Yale | Bio/Vote History | ||
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I wouldn't have used the word "state" here. Certainly some properties will be essentially uninsurable.
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David Cutler |
Harvard | Bio/Vote History | ||
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Angus Deaton |
Princeton | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Florida regulations cap insurance pricing. Also, insurers and reinsurers may not have enough capital, after one mega-event, to cover another soon afterward. "Not exist" is very stark, but I take that to mean "not offer significant levels of insurance."
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Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Liran Einav |
Stanford | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Amy Finkelstein |
MIT | Did Not Answer | Bio/Vote History | |
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Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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Austan Goolsbee |
Chicago | Bio/Vote History | ||
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Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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a lot depends on how much we continue to distort insurance markets. in too many areas (e.g., FL and MA) wealthy coastal areas subsidized by (generally) less wealthy inland areas
-see background information here |
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Robert Hall |
Stanford | Bio/Vote History | ||
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The force that will cause the private market to disappear is the federal government's provision of free government aid, just like Brown and Finkelstein on private nursing home insurance.
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Oliver Hart |
Harvard | Bio/Vote History | ||
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Bengt Holmström |
MIT | Bio/Vote History | ||
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Caroline Hoxby |
Stanford | Bio/Vote History | ||
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I would need to hear a logical argument why insurers could not price their insurance products well. Abandoning a market is rarely the best alternative for private insurers, except when they are trying to compete with subsidized government insurance.
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Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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Private insurance markets have to consider many factors. The cost of repairing the damage of large events is much greater than the pre-storm market value because there will be excess demand for construction services. Quality will be of increased concern.
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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we have prior examples of private insurers giving up on markets, eg DC for health, but Florida is big, so wholesale withdrawal is another matter.
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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Fire insurance market in California is already challenged.
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Eric Maskin |
Harvard | Bio/Vote History | ||
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William Nordhaus |
Yale | Bio/Vote History | ||
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Perhaps private flood insurance will not survive but unlikely that the the entire market will disappear.
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Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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Larry Samuelson |
Yale | Bio/Vote History | ||
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José Scheinkman |
Columbia University | Bio/Vote History | ||
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And more property will be uninsurable, if climate-change-denying politicians refuse to make the necessary mitigation investments.
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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Carl Shapiro |
Berkeley | Bio/Vote History | ||
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Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Private insurance is likely to be driven out by subsidized government insurance.
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James Stock |
Harvard | Bio/Vote History | ||
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Richard Thaler |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Daron Acemoglu |
MIT | Bio/Vote History | ||
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There is a lot of sluggishness in adjustment and coordination failures. The hope that private insurance markets work well enough and investment and migration respond optimally is just that: I hope. It may be true or more likely not.
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Joseph Altonji |
Yale | Bio/Vote History | ||
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Alan Auerbach |
Berkeley | Bio/Vote History | ||
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David Autor |
MIT | Bio/Vote History | ||
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Not sure what “substantially means.” This would reduce population inflows into flood prone areas by a non-zero amount
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Katherine Baicker |
University of Chicago | Bio/Vote History | ||
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Abhijit Banerjee |
MIT | Did Not Answer | Bio/Vote History | |
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Marianne Bertrand |
Chicago | Bio/Vote History | ||
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Markus Brunnermeier |
Princeton | Bio/Vote History | ||
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Raj Chetty |
Harvard | Did Not Answer | Bio/Vote History | |
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Judith Chevalier |
Yale | Bio/Vote History | ||
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David Cutler |
Harvard | Bio/Vote History | ||
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Angus Deaton |
Princeton | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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These mandates already exist, and are part of the government's policy, as a way to encourage movement from flood areas. There are also large subsidies.
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Aaron Edlin |
Berkeley | Bio/Vote History | ||
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Barry Eichengreen |
Berkeley | Bio/Vote History | ||
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Liran Einav |
Stanford | Bio/Vote History | ||
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Ray Fair |
Yale | Bio/Vote History | ||
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Amy Finkelstein |
MIT | Did Not Answer | Bio/Vote History | |
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Pinelopi Goldberg |
Yale | Bio/Vote History | ||
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Austan Goolsbee |
Chicago | Bio/Vote History | ||
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Michael Greenstone |
University of Chicago | Bio/Vote History | ||
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Robert Hall |
Stanford | Bio/Vote History | ||
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Mandating insurance is not the issue. The issue is free insurance from government relief programs. People who would choose to self-insure have the same incentive to avoid flood-prone locations as those who buy insurance.
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Oliver Hart |
Harvard | Bio/Vote History | ||
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Bengt Holmström |
MIT | Bio/Vote History | ||
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Caroline Hoxby |
Stanford | Bio/Vote History | ||
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Hilary Hoynes |
Berkeley | Bio/Vote History | ||
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Kenneth Judd |
Stanford | Bio/Vote History | ||
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Forcing people to pay actuarially fair insurance rates will surely affect their decisions. Best would be that people be allowed to take the risk of being wiped out by a storm and governments commit to NOT bail them out.
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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absent.... what do you expect?
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Pete Klenow |
Stanford | Bio/Vote History | ||
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Jonathan Levin |
Stanford | Bio/Vote History | ||
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Eric Maskin |
Harvard | Bio/Vote History | ||
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William Nordhaus |
Yale | Bio/Vote History | ||
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Very complicated proposition. Will be house to house combat to get people to leave their shorefront properties.
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Maurice Obstfeld |
Berkeley | Bio/Vote History | ||
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Emmanuel Saez |
Berkeley | Bio/Vote History | ||
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Larry Samuelson |
Yale | Bio/Vote History | ||
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Moving activity away from high-risk areas is essential in dealing with climate change. Appropriate policy, such as requiring insurance at at rates reflecting the risk, have an important role to play.
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José Scheinkman |
Columbia University | Bio/Vote History | ||
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Richard Schmalensee |
MIT | Bio/Vote History | ||
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Would probably also need to cut FEMA and other disaster aid -- hard to do politically.
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Carl Shapiro |
Berkeley | Bio/Vote History | ||
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Robert Shimer |
University of Chicago | Bio/Vote History | ||
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Insurance mandates will discourage new building, but note that there will still be large losses to existing structures
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James Stock |
Harvard | Bio/Vote History | ||
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Richard Thaler |
Chicago Booth | Did Not Answer | Bio/Vote History | |
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Christopher Udry |
Northwestern | Bio/Vote History | ||
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